IWM: Cracking The Trend

By - May 01, 2015, 5:30 AM CDT

Monthly time frame:

Since the 2009 IWM (Russell 2000 etf) has been rising within the boundaries of a rising channel

The advance from the October 2014 has stalled and been rejected for the second consecutive month at the upper Bollinger band (We have two potential reversal candlesticks: On March a Spinning Top and this month a Shooting Star

IWM is testing the last breakout area

Often when price is rejected at the upper Bollinger band odds favour a mean reversion towards the 20 wma (dotted red trend line)

Obviously it is too soon to speculate on the end of the rally from the 2009 low but the risk of a phase of weakness is increasing specifically if next month IWM loses the horizontal support located in the area of 120.60

Monthly oscillators are poised for further weakness: MACD has not cancelled the bearish signal cross triggered on July 2014, the RSI is displaying a massive negative divergence. If the trend line in force since September 2014 is breached it would confirm a larger pullback. Stochastic has not rolled over yet but it is overbought and it is also displaying a negative divergence

Weekly time frame:

So far we have a massive Engulfing candlestick

The trend line from the October low has been breached

After a large wide range body often the following candlestick is a small range one (Oversold bounce), so today we have to see if the support at 120.60 holds and IWM is able to reclaim the 20 wma. If it is breached the next support is located at 119.80

Zoom of the Daily time frame:

Judging by the violation of the lower Bollinger Band (It can be considered an extreme) odds should favor a bounce. We shall see if it is just one day wonder or a multi-day rebound but eventually it should fail below the resistance zone highlighted in green

Related posts

Leave a comment

Name

Email

Captcha

Comment

We will save the information entered above in our website. Your comment will then await moderation from one of our team. If approved, your data will then be publically viewable on this article. Please confirm you understand and are happy with this and our privacy policy by ticking this box. You can withdraw your consent, or ask us to give you a copy of the information we have stored, at any time by contacting us.